The Nigerian Naira witnessed a significant appreciation against the US Dollar on Monday, marking a 10.71% increase and closing at N1,339.33/$1 on the Nigerian Autonomous Foreign Exchange Market (NAFEM) window. This appreciation represents the highest closing rate since April 26, surpassing the previous rate of N1,339.23/$1, as reported by data from FMDQ.
This surge in the exchange rate marks the most substantial currency appreciation rate in two months, following the 12.84% rate recorded on May 20. The recent uptrend in the naira’s value suggests a positive turn for the country’s currency.
The increase in the naira’s value can be attributed to several factors, including low demand for dollars and a boost in Nigeria’s foreign exchange reserves. On Friday, May 24, 2024, the exchange rate stood at N1,482.81/$1, with a slight increase of 0.19% compared to previous days. The FX turnover on Friday surged to $556.25 million, indicating a 231.99% increase, likely influenced by the Central Bank of Nigeria’s aggressive liquidity management strategy.
The CBN’s efforts to raise significant funds from the Open Market Operations (OMO) bill auction, amounting to N1.16 trillion, have contributed to stabilizing the naira amidst inflationary pressures and economic challenges. However, FX turnover experienced a sharp decline of 67.50% on Monday, reaching $180.8 million, indicating reduced demand for dollars and strengthening the naira against the dollar.
Nigeria’s foreign exchange reserves have shown a consistent increase over the past month, rising by approximately $630.1 million as of May 23, 2024. This upward trend reflects the country’s resilience in maintaining financial stability amid economic uncertainties. The Monetary Policy Committee (MPC) has emphasized the importance of boosting external reserves to sustain financial stability, urging the CBN to focus on accretion to reserves.
In line with efforts to enhance reserves, the CBN plans to double diaspora remittance inflow this year, aiming to ensure a steady flow of foreign exchange into the country. Despite challenges in the official market, characterized by unstable dollar supply, the increase in FX reserves signals positive prospects for Nigeria’s currency stability and economic resilience.
